Chapter 16 Micro

Special-interest legislation usually

has concentrated benefits but widespread costs

The basic difference between a public bureau and a market firm is that the bureau

has no incentive to minimize costs

In a direct, majority-rule vote,

only the median voter is completely satisfied

Legislation that provides a price support for dairy farmers is an example of

special-interest legislation

The purpose of a political action committee is

to help elect officials sympathetic to its members' special interests

According to the textbook, public choice theory suggests that political candidates try to get elected by

appealing to the median voter

A tax on productive activity tends to

decrease formal market activity because it lowers the return on such activity

Generally, people are more satisfied with private market outcomes than with public voting outcomes because

each consumer in the private market can choose the quantity he or she desires

Rational ignorance suggests that voters may not spend much time examining candidates before an election because

each voter has virtually no chance of deciding the election

Tax evasion differs from tax avoidance in the sense that evasion

is illegal

According to rent-seeking theory, which group is most likely to benefit from representative democracy?

lawyers

One consequence of raising tax rates is that it

leads to more underreporting of income

Special-interest groups have little incentive to

make the economy more efficient

Rationality implies that in order to get what they want, people will spend the most time and effort

making private market decisions

The term underground economy refers to

market activity not reported to the government

According to William Niskanen, bureaucrats seek to

maximize budgets

Legislators often have difficulty passing legislation with widespread benefits, but that imposes concentrated costs because those who bear the costs will __________ the legislation, while those who would reap the benefits will __________ the legislation.

protest; not actively support

In deciding between using a public bureau or a private firm to collect garbage, elected officials may prefer a public bureau because

they can convey political favors by giving people jobs in the public bureau

The efficient level of public good provision is determined

where the market demand curve intersects the marginal cost curve

The median-voter model attempts to explain

why, in a democracy, the preferences of the typical voter often will dominate other choices